JUDGMENT OF 31. 1. 1978 — CASE 94/77 ZERBONE v AMMINISTRAZIONE DELLE FINANZE DELLO STATO

In Case 94/77 REFERENCE to the Court under Article 177 of the EEC Treaty by the Tribunale di Genova for a preliminary ruling in the action pending before that court between

THE COURT composed of: H. Kutscher, President, M. Sørensen and G. Bosco (Presidents of Chambers), A. M. Donner, P. Pescatore, Lord Mackenzie Stuart and A. O'Keeffe, Judges, Advocate General: J.-P. Warner Registrar: A. Van Houtte

gives the following

JUDGMENT

Facts and issues

The facts, the procedure and the written observations submitted pursuant to Article 20 of the Protocol on the Statute of the Court of Justice of the EEC may be summarized as follows:

I — Facts and procedure

After Italy became a party to the system of monetary compensatory amounts, the Commission by Regulation No 2887/71 of 30 December 1971 (Official Journal, English Special Edition 1966-1972, p. 67) laid down the relevant detailed rules for the application of the basic Regulation No 974/71. Article 4 of Regulation No 2887/71 replaced the provisions of Article 4 (1) of Regulation No 1013/71 by the following provisions:

‘(1) The Member States referred to in Article 1 of Regulation (EEC) No 974/71 shall not apply the compensatory amounts referred to in that article to imports effected under contracts: (a) concluded before: … 19 December 1971, for France and Italy; and (b) registered before: … 28 December 1971, for France and Italy, with the authorities of the relevant Member State or which can be proved by official documents to have been concluded.’

Article 4 (2) of Regulation No 1013/71 provided:

‘However, paragraph (1) shall apply only to the extent necessary to allow the contract to be executed under the conditions which would have existed had the monetary measures referred to in Article 1 of Regulation (EEC) No 974/71 not been taken.’

The Italian legislation adopted in application of these Community provisions is to be found in Article 20 of Decree-Law No 661 of 15 November 1972 (which became Law No 843 of 18 December 1972) which provided: The compensatory amounts … shall not be payable in respect of goods which are the subject of commercial transactions concluded prior to 19 December 1971 even if they are cleared for final importation after 2 January 1972, provided that payment is made in currency other than US dollars or alternatively in US dollars covered by exchange guarantee or other clauses having the same effect'.

The Italian undertaking Fratelli Zerbone, the plaintiff in the main action, imported consignments of frozen beef and veal, unboned (bone-in), from third countries under contracts of purchase concluded before 19 December 1971. For these imports, payment of which was agreed and made in US dollars by opening a series of irrevocable credits in favour of the exporter-supplier, the plaintiff was asked to pay as monetary compensatory amounts the sum of Lit 140771735.

Zerbone took the view that this payment was not due and sought a declaration from the Tribunale di Genova that it was not required to pay the sum. In its claim it makes the following allegations:

The demand by the Italian administration has its origin in Article 16 of the Decree-Law No 661 of 15 November 1972 which adopted the Community rules in the matter and in Article 20 of the same decree-law which in fact differs from the Community rules and is accordingly incompatible with them.

The imposition of monetary compensatory amounts on imports made into Italy from third countries is not justified in view of the devaluation of the Italian lira in relation to other Community currencies.

In answer to the claim the Amministrazione delle Finanze dello Stato contended that Article 20 of Decree-Law No 661 was a necessary implementing measure for Article 4 (2) of Regulation No 1013/71 and thus perfectly compatible with it.

The Tribunale di Genova took the view that a question of the interpretation of Community provisions arose and by order dated 13 June 1977 stayed the proceedings and referred the following questions to the Court of Justice for a preliminary ruling under Article 177 of the EEC Treaty:

A — With reference to the provisions of Article 4 (1) and (2) of Regulation (EEC) No 1013/71 of the Commission of 17 May 1971, as amended by Article 4 of Regulation (EEC) No 2887/71 of the Commission of 30 December 1971

On the assumption that the said paragraph (2) of Article 4 of Regulation (EEC) No 1013/71 is still in force and that it must be interpreted in the light of the fifth recital to the said regulation, the following questions are submitted:

1) Do Regulations (EEC) Nos 974/71 and 1013/71, the second of which was in part amended by Regulation (EEC) No 2887/71, permit the Member States, and in particular the Italian State, to promulgate rules having the force of law laying down specific criteria concerning the applicability or otherwise of compensatory amounts to contracts concluded before 19 December 1971 in order, as provided for under Article 4 (2) of Regulation (EEC) No 1013/71, to ‘allow the contract to be executed under the conditions which would have existed had the monetary measures referred to in Article 1 of Regulation (EEC) No 974/71 not been taken’ ?

2) If Question 1 is answered in the affirmative, does Article 20 of Decree Law No 661 of 15 November 1972, enacted as Law No 843 of 18 December 1972, which provides that compensatory amounts shall not be due on goods which are the subject of commercial transactions concluded before 19 December 1971, even though cleared for final importation after 2 January 1972, provided that payment is made in currency other than US dollars or alternatively in US dollars covered by exchange guarantee or other clauses having the same effect, answer the purpose, in the majority of cases, of pursuing the said objective in Article 4 (2) of Regulation (EEC) No 1013/71; and, accordingly, is it or is it not compatible with the Community provision?

3) If the answer to Question 1 is in the negative, is the rule in Article 4 (2) of Regulation (EEC) No 1013/71 completely effective in itself and is it therefore to be interpreted as having intended to leave it to the courts of the Member State concerned to decide when the contract was executed under the conditions which would have existed in the absence of the monetary measures referred to in Article 1 of Regulation (EEC) No 974/71? In any case:

4) Is the reference to allowing ‘the contract to be executed’ in the said Community provision to be taken as meaning and sufficient to refer to the fulfilment by the importer of the obligation to pay the price in accordance with the conditions stipulated in the contract?

5) In the case of payment made by the opening of an irrevocable credit in favour of the exporter must the contract be regarded as having been executed on the date of communication to the payee of the notice of opening of the irrevocable credit in his favour or, on the other hand, on the date when the price is actually paid to the exporter?

B — With reference to Articles 2, 3 and 4 of Regulation (EEC) No 974/71 of the Council of 12 May 1971

Under the system of monetary compensatory amounts adopted by Regulation (EEC) No 974/71, the importation of the products referred to in Article 2 of that regulation could be subject to monetary compensation, provided that fluctuation (beyond the limits laid down) of the exchange rate of the currency of the importing State was recognized as a revaluation of that currency in relation to the official parity against United States dollars.

As the result of the monetary policy decisions adopted on 18 December 1971 and of the adoption of the. ‘central exchange rates’ by some Member States, the currencies of all the Member States were revalued in terms of the US dollar; and since, on the other hand (according to the plaintiff), in the first weeks when these provisions were applied, the Italian currency depreciated in value.

The following questions accordingly arise:

1) On the assumption that the situation described by the plaintiff is proved to have existed in fact, was the Amministrazione delle Finanze Italiane legally entitled to levy the compensatory amounts while that situation lasted?

2) Bearing in mind that the compensatory amounts may vary from time to time, in accordance with variations in exchange rates, what is the date to be used as a reference point in the case of individual commercial transactions in determining whether or not the conditions required by Community legislation exist for the application of compensatory amounts (Article 4 of Regulation (EEC) No 974/71), for the fixing of the amount thereof (Article 2) and for any alteration in them (Article 3); in particular, must reference be made to the date of importation or exportation of the goods, or the date on which the price is paid or to any other moment in time?

The order referring the matter to the Court was registered at the Court Registry on 26 July 1977.

Upon hearing the report of the Judge-Rapporteur and the views of the Advocate General, the Court decided to open the oral procedure without any preparatory inquiry.

II — Summary of written observations submitted to the Court under Article 20 of the Protocol on the Statute of the Court of Justice of the EEC

Zerbone maintains that the national rules are illegal for two reasons.

First, the Italian legislature did not have power to legislate in the matter. The choice of the criteria for applying or not applying compensatory amounts in Italy was conferred by Article 6 of Regulation No 974/71 solely to the Commission which then used its powers in Regulation No 1013/71 and subsequent regulations. The national rules would also be unlawful even if it were considered that in adopting the detailed rules referred to in Article 6 of Regulation No 974/71 the Commission had made incomplete arrangements and had entrusted the Member States with the task of completing them. A provision of a basic regulation of the Council which authorizes the Commission to adopt, after consulting the Management Committee, detailed rules directly applicable in a Member State cannot be interpreted as allowing the Commission to entrust the Member State in question (even implicitly) to adopt such detailed rules since it is a task which the Council has entrusted to the Commission and which would thus be removed from any control by the Council (cf. judgment of 30 October 1975 in Case 23/75 Rey Soda [1975] ECR 1279).

The detailed rules which Member States may adopt in the context of their legislative activity are of a technical or procedural nature, only intended to create the conditions allowing the legislative substance of the Community rules to be applied without interfering with them or acting in a manner outside the substance of such rules. They differ from supplementary rules which presuppose a legislative lacuna which they are intended to fill by acting within and affecting the substance of the rules. By defining independently the criteria for application in Italy of the compensatory amounts to contracts concluded before 19 December 1971 Article 20 of Decree-Law No 661 expresses an essential legislative content which takes the place of that of Article 4 (2) of Regulation No 1013/71 by annulling any direct effect which the latter has in the Italian legal system.

In the second place Article 20 of Decree-Law No 661 has a legislative content differing from that of Article 4 (2) of Regulation No 1013/71. As regards the Community rules Zerbone could claim as against the customs that the monetary measures adopted by Italy had no effect upon the contracts on the basis of which the imports in question were made and although payment for the transaction was made in US dollars without an exchange guarantee it is also able to show that the contracts were executed, ‘under the conditions which would have existed had the monetary measures referred to in Article 1 of Regulation (EEC) No 974/71 not been taken’. On the other hand as regards the national law such factors would be quite irrelevant.

Article 4 (2) of Regulation No 1013/71 provides that imports effected on the basis of contracts concluded before 19 December 1971 can be the subject of compensatory measures only if and to the extent to which such contracts were executed in the same conditions of monetary equilibrium as those which existed before the devaluation of the US dollar. Understood in this sense the provision in question constitutes a complete legal instrument and the legislature's intention is expressed there with clarity and precision so as to make it directly applicable to the different cases arising in practice without its being necessary to have recourse to national rules introducing other criteria for applying the compensatory charges.

As regards the present case it seems that the national court could have resolved it by applying Community rules alone: that is to say checking on the basis of the evidence whether in executing the purchase contracts for the imported meat Zerbone had profited from the devaluation of the dollar. If so it would have confirmed the lawfulness of the compensatory charges and if not would have declared them unlawful. On the other hand the application of Article 20 of Decree-Law No 661 would lead to decisions inconsistent with and contrary to the Community provisions because even if the price of the transaction had been settled in dollars without an exchange guarantee the purchaser nevertheless did not profit from the dollar crisis since the undertaking had made payment before the decisions referred to of 18 December 1971.

According to Italian law a party to a contract who does what he is required by the contract not only discharges the contractual obligation but ‘executes the contract’. In the contracts concluded by Zerbone the obligation of the party liable for the price, which was postponed in relation to the conclusion of the contracts, was due to be performed at a different time from that of delivery of the goods. In view of the fact that the objective of the Community provision is to compensate for currency fluctuations on prices for which intervention measures are provided in the context of the common organization of the agriculture market and that they could affect only the obligation to pay the price it is necessary to provide that the time for performance of the obligation to deliver the goods shall not be relevant for the purposes referred to by the Community rules.

In view of the fact that the objectives of the Community rule are to compensate for fluctuations caused by the devaluation of the American currency and that as a result execution of the contract should be understood as meaning performance of the obligation to pay the price there is no room for doubt that in the event of payment of the price by the opening of an irrevocable credit it is necessary to refer, in order to determine ‘the execution of the contract’, to the making available to the issuing bank of the sum due by the purchaser, the giver of the order. In making such provision the importer irrevocably performs his part of the contract and it is to this time that reference should be made to establish whether the trader has profited from the monetary crisis of 18 December 1971. In the same way the time when the credit is used is quite irrelevant for the system of compensatory amounts referred to in Article 1 of Regulation No 974/71:

On the one hand because the Community provision authorizes the application of compensatory amounts to the importer who owes the price and not to the exporter who has to deliver the goods and uses the credit;

On the other hand because in the present case the users of the irrevocable credits are not subject to the Community rules relating to compensatory amounts since they all belong to third countries.

The Italian Government observes that Article 4 (2) constitutes a derogation from the prohibition on applying compensatory amounts to imports made on the basis of contracts concluded before a certain date (for Italy 19 December 1971). The reason for this is maintenance of the principle of the protection of the legitimate expectations of traders and also (since it is a matter of compensatory amounts on imports) by the need to prevent the price in national currency of the imported products and thus the price of the importing countries from differing from the Community prices.

Article 4 (2) does not contain (and could not contain) a precise and complete rule making it unnecessary for (or at least not allowing) any subsequent legislative activity on the pan of the Member States for giving actual effect to it. Its content is complete and is in the nature of a rule in the case where it provides for derogation; on the other hand it expresses only an objective to be attained when it accepts this derogation ‘… to the extent necessary…’. The criteria specified to determine in the particular case if and when the aforementioned objective is fulfilled can thus be provided for and determined by the Member States on condition obviously that the criteria are consistent with the objective of the Community rules. These considerations allow an affirmative reply to be given to the question put under A (1) whereas on the other hand there seems as a result no purpose in the question under A (3).

The question raised under A (2) involves the interpretation of the national rule and is thus as a result outside the jurisdiction of the Court of Justice. Nevertheless it may be remembered that as from 19 December 1971 the US dollar was (also) devalued in relation to the Italian lira which in turn was devalued in relation to the other Member States' currencies. In these circumstances it was the duty of the Italian Government to ensure that the devaluation of the dollar in relation to the Italian lira did not alter the performance of contracts the payment for which had been provided for in dollars or the imports relating thereto. It might have happened that in spite of the fact that the contracts had been made prior to 19 December 1971 the importer might profit as regards payment from the devaluation in question. In this case not only would the importer have had an unjustified profit but there would have been adverse repercussions on Community prices. For these reasons the national rule referred to in Article 20 of the Decree-Law in question was limited to taking into account imports made on the basis of contracts providing for payment in dollars. To this end the criteria adopted are of two kinds, namely:

a) the contract relating to payment in dollars should contain an ‘exchange guarantee’ clause;

b) or other clauses ‘having similar effects’.

It is quite a common practice in international commercial transactions to provide for the criterion mentioned under (a). If the currency specified in the contract is devalued in relation to another or other currencies taken as references the contractual equilibrium remains unchanged.

If he has to observe the exchange guarantee clause the importer cannot profit from the revaluation of the lira in relation to the dollar.

However a limitation to what the clause in question provided for would have involved an appreciable reduction in the potential scope of the principle established in Article 4 (2) of Regulation No 1013/71. The national rule referred to in Article 20 of Decree-Law No 661 thus provided a second and more general and flexible criterion by means of which the objectives in question would remain guaranteed.

It would cover all cases where it could be shown by means of strict documentary evidence subject to assessment by the court that the price of the transaction to the importer in Italian lire had remained unchanged in relation to that which was provided before 19 December 1971. The national rule is thus not incompatible with the Community rule but constitutes a necessary rule of implementation.

The reference to allowing ‘the contract to be executed…’ contained in the aforementioned Article 4 (2) can be understood only as the performance of the obligation by the importer-purchaser to pay the price fixed in dollars. And since the performance of this obligation assumes that the dollars necessary for payment of the price have already been acquired where this is proved by means of documents the monetary measures of 19 December 1971 cannot affect the performance of the contract.

The same conclusion applies to the question contained under A (5) which nevertheless does not relate to the interpretation of Community law. Where payment is made by the opening of an irrevocable credit it is for the national court to determine the date on which the bank's customer provided the dollars. Moreover the situation is not altered by the fact that the payment in dollars took place by means of the opening of an irrevocable bank credit in favour of the exporter-seller.

There is no purpose in the question contained in B (1) since the assumption on which it is based is false.

As to the question contained in B (2) the answer is contained by implication in the provisions of Article 1 of Regulation No 974/71. The compensatory amounts are chargeable ‘on imports’ and granted ‘on exports’. The relevant dates are those of import and export.

As regards the questions contained under A (1) and (2) the Commission observes that the objective of the Community legislature in Regulation No 1013/71 was to avoid unexpected damage to a party to a contract who, while showing all the necessary and usual diligence of a trader could not foresee the introduction of compensatory amounts; there was no question however of granting a benefit or premium to the Italian importer for whom the introduction of monetary compensatory amounts did not involve any adverse consequences. A case of the kind where the payment of compensatory amounts constitutes an additional charge may arise in numerous circumstances, for example when the payment has been made in Italian lire, when the payment for the goods has been made before 19 December 1971 or yet again when the necessary foreign currency for the payment (providing that it relates to commercial transactions concluded before 19 December 1971) has been acquired in forward dealings before that date. Where the contract concluded between an Italian importer and an exporter in another State at the date and subject to the conditions provided for in Article 4 (1) of Regulation No 1013/71 provides for payment for the goods in dollars, the Italian importer may find himself in one of the following situations:

Either he has already bought the dollars in cash or for the account at the exchange rate applicable before the devaluation of the US currency and in this case he will not be able to profit from the devaluation. He will thus have paid the corresponding value in Italian lire which he had originally expected to pay and the imposition of compensatory amounts would involve him in a new and unexpected burden with adverse effects so far as the contract is concerned on the respective obligations of the parties to the contract and, as far as he is concerned, on his financial obligation.

Alternatively he may not yet have acquired the dollars and he pays for the imported goods with dollars devalued by the percentage referred to above. In this case the imposition of compensatory amounts does not harm the performance of the contract.

It follows from the above that the words used in the fifth recital and in Article 4 (2) of Regulation No 1013/71 are necessarily incomplete and consequently find concrete application in a series of cases which the national provisions (providing of course that they respect the objective of the Community rules) may provide for expressly. The Community rules are directly applicable and the implementing provisions adopted by the Member States have an illustrative function in relation to those rules and their interpretation can be governed only by the objective of the Community rules.

As regards the third question it must be accepted that in the last resort where there is a dispute the courts have always the task of deciding whether the performance of the contract has taken place under conditions which would have existed in the absence of the monetary compensatory amounts. A rule inserted to ensure fairness, such as that of Article 4 (2) of Regulation No 1013/71, requires, each time it is relied on, consideration of the transaction in question first by the administrative authority and, where contested, by the courts so as to avoid the conferment of an advantage where no damage has been suffered or conversely the refusal of the benefit to a person who satisfies the required conditions.

As to the fourth and fifth questions the reference to allowing ‘the contract to be executed’ must be understood as meaning, when it is a question of the obligation on the importer of goods coming from other Member States or, as in the present case, from third countries, the performance of the obligation on the purchaser. It is necessary therefore to establish whether the contract has been performed on the conditions originally provided for. In view of the fact that it is only by specific inquiry that it is possible to ascertain this, it seems to the Commission that the conditions provided for the payment for the goods are not decisive; in the same way the opening of an irrevocable credit does not necessarily establish the fact that and the time when the foreign currency has been acquired by the bank and debited to its customer-purchaser unless there has been an exchange guarantee or other similar clause. It is the conditions under which the foreign currency has been acquired which are decisive.

As to Question B (1) the particulars stated do not accord with actual facts: after the Washington agreements of 18 December 1971‘central rates’ differing from the official parity declared by the International Monetary Fund were fixed in the following way:

the US dollar was devalued by 7,89 %;

the Italian lira was devalued by 1 %.

The Italian lira was therefore revalued in relation to the dollar.

As to Question B (2) the Commission considers first of all that in fixing the monetary compensatory amounts the decisive factor is the day of import or export. The object of the system is to re-establish at the frontier the common price which constituted the basis on which the common agricultural policy was founded before being disturbed by the currency crises which have succeeded one another since 1969. If the burden or advantage represented by the compensatory amounts for the person paying or receiving them were displaced in time there would be added to all the inconveniences already existing and resulting from the absence of fixed parities a new inconvenience arising from the fact that during the period elapsing between the date of import or export and that of payment the trader would unfairly have to face an uncovered balance with loss of value or would profit quite as unfairly from a delay in payment with a consequent advantage over his competitors. The day of importation should be regarded as the day on which the import declaration of the goods is accepted by the customs authorities (cf. judgments given in Cases 35/71 [1971] ECR 1083, 113/75 [1976] ECR 983 and 74/74 [1975] ECR 547).

The Commission considers that the questions put by the Tribunale di Genova should be answered as follows:

1) Article 4 (2) of Regulation No 1013/71, repealed by Regulation No 2342/72 [sic], allowed Member States to adopt supplementary provisions for the practical execution of the Community rules which in respect of certain contracts give exemption from the payment of monetary compensatory amounts on importation. In view of its objective Article 4 (2) of Regulation No 1013/71 must be interpreted as meaning that contracts relating to imports of goods payment for which has been made in devalued US dollars following the Washington agreements of 18 December 1971 do not have the benefit of the exemption in question. The decisive factor is the conditions and in particular the rate of exchange at which payment was made; on the other hand the opening of an irrevocable credit is not in itself relevant.

2) The imposition of monetary compensatory amounts could be authorized only by the Commission, which fixed the amounts. In determining the amounts applicable it is necessary to refer to the day on which the import was effected, that is to say, the day on which the declaration of importation of the goods was accepted by the customs authorities. The plaintiff in the main action, represented by Mr Rossetto of the Naples Bar, the Government of the Italian Republic, represented by Mr Braguglia, Vice Awocato dello Stato, and the Commission of the European Communities, represented by its Legal Adviser, Mr Maestripieri, acting as Agent, made oral observations at the hearing on 1 December 1977. The Advocate General delivered his opinion at the hearing on 13 December 1977.

Decision

1. By order dated 13 June 1977, received at the Court on 26 July 1977, the Tribunale di Genova referred to the Court for a preliminary ruling under Article 177 of the EEC Treaty various questions on the interpretation of certain provisions of Regulation (EEC) No 974/71 of the Council of 12 May 1971 on certain measures of conjunctural policy to be taken in agriculture following the temporary widening of the margins of fluctuation for the currencies of certain Member States (Official Journal, English Special Edition 1971 (I), p. 257) and Regulation (EEC) No 1013/71 of the Commission of 17 May 1971 laying down detailed rules of application for Regulation No 974/71 (Official Journal, English Special Edition 1966-1972, p. 52).

2. These questions have been raised in proceedings relating to the imposition of monetary compensatory amounts on the importation into Italy by the Italian undertaking Zerbone, the plaintiff in the main action, of consignments of frozen meat originating in third countries.

3. In respect of such imports which were made on the basis of contracts concluded before 19 December 1971 (the reference date laid down in Article 4 of Regulation No 1013/71, as amended by Article 4 of Regulation No 2887/71 of 30 December 1971 (Official Journal, English Special Edition 1966-1972 p. 67) the plaintiff claims the benefit of the exemption from payment of the monetary compensatory amounts provided for by the said article.

4. However, the plaintiff in the main action was required to pay the sum of Lit 140771735 as monetary compensatory amounts in respect of such imports, payment for which had been agreed and made in US dollars by the opening of a series of irrevocable credits in favour of the exporter-supplier.

5. The Zerbone undertaking considered that this demand for payment was not justified on the ground that it was based on the Italian Decree-Law No 661 of 15 November 1972, which adopted the Community rules in the matter but which incorporated new provisions, and that there should be no imposition of monetary compensatory amounts on imports made into Italy from third countries in view of the devaluation of the Italian lira in relation to other Community currencies.

6. The Italian Finance Administration, the defendant in the main action, maintains that the national law is a necessary implementation measure for applying Article 4 (2) of Regulation No 1013/71 and is accordingly compatible with it.

7. The questions raised are as follows: A — With reference to the provisions of Article 4 (1) and (2) of Regulation (EEC) No 1013/71 of the Commission of 17 May 1971, as amended by Article 4 of Regulation (EEC) No 2887/71 of the Commission of 30 December 1971. On the assumption that the said paragraph (2) of Article 4 of Regulation (EEC) No 1013/71 is still in force and that it must be interpreted in the light of the fifth recital to the said regulation, the following questions are submitted: (1) Do Regulations (EEC) Nos 974/71 and 1013/71, the second of which was in part amended by Regulation (EEC) No 2887/71, permit the Member States, and in particular the Italian State, to promulgate rules having the force of law laying down specific criteria concerning the applicability or otherwise of compensatory amounts to contracts concluded before 19 December 1971 in order, as provided for under Article 4 (2) of Regulation (EEC) No 1013/71, to ‘allow the contract to be executed under the conditions which would have existed had the monetary measures referred to in Article 1 of Regulation (EEC) No 974/71 not been taken’ ? (2) If Question 1 is answered in the affimative, does Article 20 of Decree Law No 661 of 15 November 1972, enacted as Law No 843 of 18 December 1972, which provides that compensatory amounts shall not be due on goods which are the subject of commercial transactions concluded before 19 December 1971, even though cleared for final importation after 2 January 1972, provided that payment is made in currency other than US dollars or alternatively in US dollars covered by exchange guarantee or other clauses having the same effect, answer the purpose, in the majority of cases, of pursuing the said objective in Article 4 (2) of Regulation (EEC) No 1013/71; and, accordingly, is it or is it not compatible with the Community provision? (3) If the answer to Question 1 is in the negative, is the rule in Article 4 (2) of Regulation (EEC) No 1013/71 completely effective in itself and is it therefore to be interpreted as having intended to leave it to the courts of the Member State concerned to decide when the contract was executed under the conditions which would have existed in the absence of the monetary measures referred to in Article 1 of Regulation (EEC) No 974/71? In any case: (4) Is the reference to allowing ‘the contract to be executed’ in the said Community provision to be taken as meaning and sufficient to refer to the fulfilment by the importer of the obligation to pay the price in accordance with the conditions stipulated in the contract? (5) In the case of payment made by the opening of an irrevocable credit in favour of the exporter must the contract be regarded as having been executed on the date of communication to the payee of the notice of opening of the irrevocable credit in his favour or, on the other hand, on the date when the price is actually paid to the exporter? B — With reference to Articles 2, 3 and 4 of Regulation (EEC) No 974/71 of the Council of 12 May 1971 Under the system of monetary compensatory amounts adopted by Regulation (EEC) No 974/71, the importation of the products referred to in Article 2 of that regulation could be subject to monetary compensation, provided that fluctuation (beyond the limits laid down) of the exchange rate of the currency of the importing State was recognized as a revaluation of that currency in relation to the official parity against United States dollars. As the result of the monetary policy decisions adopted on 18 December 1971 and of the adoption of the ‘central exchange rates’ by some Member States, the currencies of all the Member States were revalued in terms of the US dollar; and since, on the other hand (according to the plaintiff), in the first weeks when these provisions were applied, the Italian currency depreciated in value. The following questions accordingly arise: (1) On the assumption that the situation described by the plaintiff is proved to have existed in fact, was the Amministrazione delle Finanze Italiane legally entitled to levy the compensatory amounts while that situation lasted? (2) Bearing in mind that the compensatory amounts may vary from time to time, in accordance with variations in exchange rates, what is the date to be used as a reference point in the case of individual commercial transactions in determining whether or not the conditions required by Community legislation exist for the application of compensatory amounts (Article 4 of Regulation (EEC) No 974/71), for the fixing of the amount thereof (Article 2) and for any alteration in them (Article 3); in particular, must reference be made to the date of importation or exportation of the goods, or the date on which the price is paid or to any other moment in time?

8. It is necessary to consider in the first place the questions relating to the validity of the imposition of monetary compensatory amounts on imports into Italy at the date in question.

9. The exchange parity of the Italian lira was established with the International Monetary Fund at the rate of Lit 625 to the United States dollar with the possibility of a fluctuation of 1 % on either side on this rate.

10. Following the decisions taken at Washington on 18 December 1971 Italy informed the International Monetary Fund of a new exchange rate (called the ‘central rate’) for its currency, namely the rate of Lit 581,50 per dollar with a margin of fluctuation of 2,25 % on either side.

11. Since Italy had accepted a rate of exchange for its currency higher than the fluctuation limit authorized by the international rules, that is to say the Bretton Woods Agreement of 27 December 1945, it follows that the condition for the application of the system of monetary compensatory amounts in Italy existed in spite of the fact that in relation to certain other currencies the Italian lira was devalued.

12. Accordingly the Commission was empowered to adopt in Regulation No 2887/71 the detailed rules for applying Regulation No 974/71 to Italy and to determine the monetary compensatory amounts applicable to Italy in Regulation No 17/72 of 31 December 1971 (Journal Officiel L 5, p. 1) and the subsequent rules.

13. Question B (1) should be answered to that effect.

14. The second question under B asks what is the date to be used as a reference point in the case of individual commercial transactions (import or export) in determining whether or not the conditions exist for the application of compensatory amounts and for fixing the amount thereof.

15. Article 1 of Regulation No 974/71 in authorizing Member States to charge or grant monetary compensatory amounts for certain products does not expressly stipulate the date to which reference must be made for the transactions referred to.

16. The objective of the system is to re-establish at the frontier the common price which was the basis of the common agricultural policy before it was disturbed by the currency fluctuations which have succeeded one another since 1969.

17. If the burden or advantage represented by the compensatory amounts for the person paying or receiving them were displaced in time there would be added to all the inconveniences already existing and resulting from the absence of fixed parities a new inconvenience arising from the fact that during the period elapsing between the date of import or export and that of payment the trader would unfairly have to face an uncovered balance with loss of value or would profit quite as unfairly from a delay in payment with a consequent advantage over his competitors.

18. The practice followed in all Member States of taking the day of importation or exportation as the reference date must be regarded as lawful.

19. The first three questions under A ask whether Member States are authorized to adopt provisions having the force of law to determine the specific criteria for the applicability or otherwise of monetary compensatory amounts to ‘existing contracts’.

20. Article 4 of Regulation No 1013/71 of the Commission of 17 May 1971 as amended by Article 4 of Regulation No 2887/71 of 30 December 1971 provides:

‘(1). The Member States referred to in Article 1 of Regulation (EEC) No 974/71 shall not apply the compensatory amounts referred to in that article to imports effected under contracts: (a) concluded before: … 19 December 1971, for France and Italy; and (b) registered before: … 28 December 1971, for France and Italy, with the authorities of the relevant Member State or which can be proved by official documents to have been concluded.

(2). However, paragraph (1) shall apply only to the extent necessary to allow the contract to be executed under the conditions which would have existed had the monetary measures referred to in Article 1 of Regulation (EEC) No 974/71 not been taken.’

21. To implement these provisions the Italian legislature adopted Article 20 of Decree-Law No 661 of 15 November 1972 (subsequently Law No 843 of 18 December 1972) which provided that ‘monetary compensatory amounts shall not be payable in respect of goods which are the subject of commercial transactions concluded prior to 19 December 1971 even if they are cleared for final importation after 2 January 1972, provided that payment is made in currency other than US dollars or alternatively in US dollars covered by exchange guarantee or other clauses having the same effect’.

22. A Community regulation is binding in its entirety and directly applicable in all Member States.

23. As the Court has already stated in other contexts and in particular in Case 34/73 Variola [1973] ECR 981, the direct application of a Community regulation means that its entry into force and its application in favour of or against those subject to it are independent of any measure adopting it into national law.

24. By reason of the obligations imposed on them by the Treaty Member States must not impede the direct effect of regulations or other rules of Community law.

25. The scrupulous observation of this duty is an indispensable requisite for the simultaneous and uniform application of Community regulations throughout the whole of the Community.

26. Accordingly Member States must not adopt or allow national institutions with a legislative power to adopt a measure by which the Community nature of a legal rule and the consequences which arise from it are concealed from the persons concerned.

27. Although it is true that in the event of difficulty of interpretation the national administration may be led to adopt detailed rules for the application of a Community regulation and at the same time to clarify any doubts raised, it can do so only in so far as it complies with the provisions of Community law and the national authorities cannot issue binding rules of interpretation.

28. Article 4 (2) of Regulation No 1013/71, understood in the light of the fifth recital in the preamble to the regulation, may be interpreted and applied by a court without it being necessary to adopt national legislative provisions for its interpretation.

29. Accordingly the provisions of that article have a direct effect in every Member State and the courts of each Member State have the task, subject to the possibility of a reference under Article 177 of the EEC Treaty, of deciding as to their application in all cases of dispute arising in that State.

30. It follows that the answer to the first question under A must be in the negative, the second question does not call for an answer and the answer to the third question must be in the affirmative.

31. As regards the fourth and fifth questions, the relevant provision must be interpreted in the light of its objective.

32. The question is whether the contract was executed under the conditions which would have existed in the absence of the monetary measures which led to the introduction of the monetary compensatory amounts.

33. Where the contract provides for payment by the opening of an irrevocable documentary credit the answer must depend on the nature of the arrangements agreed between the importer and the issuing bank and these may in turn depend on the provisions of the local law applicable to them.

34. Where the credit is to be opened for a sum in foreign currency (as, in this case, dollars), the crucial date will be that upon which the rate of exchange determining the amount of the importer's liability to the issuing bank was applicable.

Costs

35. The costs incurred by the Government of the Italian Republic and by the Commission of the European Communities which have submitted observations to the Court are not recoverable and as these proceedings are, in so far as the parties to the main action are concerned, in the nature of a step in the action pending before the national court, the decision on costs is a matter for that court.

On those grounds, THE COURT, in answer to the questions submitted to it by the Tribunale di Genova by order of 26 July 1977, hereby rules:

(1) Regulations Nos 974/71 and 1013/71, as amended by Regulation No 2887/71, do not permit Member States to adopt provisions laying down specific criteria concerning the applicability or otherwise of compensatory amounts to contracts concluded before 19 December 1971 in order to ‘allow the contract to be executed under the conditions which would have existed had the monetary measures referred to in Article 1 of Regulation (EEC) No 974/71 not been taken’, as provided for under Article 4 (2) of Regulation No 1013/71.

(2) The provisions of Article 4 (2) of Regulation No 1013/71 are fully effective in themselves and must therefore be interpreted as leaving it to the courts of the Member State concerned to decide whether the contract was executed under the conditions which would have existed in the absence of the monetary measures referred to in Article 1 of Regulation No 974/71.

(3) As regards the application of Article 4 (2) of Regulation No 1013/71 the question is whether the contract was executed under the conditions which would have existed in the absence of the monetary measures which led to the introduction of the monetary compensatory amounts. Where the contract provides for payment by the opening of an irrevocable documentary credit the answer must depend on the nature of the arrangements agreed between the importer and the issuing bank and these may in turn depend on the provisions of the local law applicable to them. Where the credit is to be opened for a sum in foreign currency (as, in this case, dollars), the crucial date will be that upon which the rate of exchange determining the amount of the importer's liability to the issuing bank was applicable.

(4) The Commission was empowered to adopt in Regulation No 2887/71 the detailed rules for applying Regulation No 974/71 to Italy and to determine the monetary compensatory amounts applicable to Italy in Regulation No 17/72 and the subsequent rules.

(5) For the purpose of determining whether the conditions for applying and determining monetary compensatory amounts are fulfilled reference must be made in respect of each commercial transaction (importation or exportation) to the day of the importation or exportation.